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01 Vodacom Group Limited Regulatory report for the year ended 31 March 2018
South Africa
Electronic Communications Amendment Bill
(ECA Bill)
The Ministry of Telecommunications and Postal Services (Ministry)
published a White Paper, as approved by cabinet, on 2 October 2016.
On 17 November 2017, the Department of Telecommunications and
Postal Services (DTPS) gazetted amendments to the Electronic
Communications Act as a Bill, the first step to giving effect to the White
Paper. Disappointingly, the amendments did not fully reflect proposals
previously submitted by the industry. As part of a public participation
Regulatory report
process, affected parties submitted comments on the ECA Bill, to the
Ministry on 31 January 2018, and participated in public hearings on
6 and 7 March 2018. Our submissions reiterated our support for a
hybrid model, establishing a competitive wholesale open access
network (WOAN) alongside the assignment of spectrum to the current
players. On the basis of an independent economic impact assessment,
we also noted the negative impacts the draft legislation could have on
investment in the sector, GDP growth and job creation. The Ministry will
consider all submissions before submitting a revised Bill to cabinet for
approval to be tabled in Parliament for further consultation and debate.
Amendment to End-user and Subscriber
Service Charter Regulations
On 30 April 2018, the Independent Communications Authority of
South Africa (ICASA) published final amendments to the End-User and
Subscriber Service Charter Regulations, which became effective on
8 June 2018, with the main objective to address consumer concerns
on out-of-bundle charges and expiry rules. These final amendments
followed a consultation process between ICASA and industry
stakeholders. The regulations address the following key concerns:
gg Voice, SMS and data bundle depletion notices to be sent to customers
at 50%, 80% and 100% depletion thresholds;
gg Operators are not allowed to default customers to out-of-bundle
charges on depletion of data bundles, unless specific opt-in
instructions have been received from the customer; and
gg Operators should allow customers the option to roll over unused data
before expiry and also provide customers with an option to transfer
data to other customers on the same network.02
ICASA priority market review
In June 2017, ICASA gave notice of its intention to conduct an inquiry to identify priority markets in the Electronic Communications
Sector (ECS). The purpose of the enquiry is to identify relevant wholesale and retail markets or market segments in the ECS that are
generally prone to ex ante regulations, and to determine from these markets and market segments those that the Authority intends
to prioritise for market reviews and potential regulation. These studies are in line with similar processes in other markets around the
world. The final phase of the inquiry would be the publication of a findings document, which is expected in the second half of
FY2019.
Competition Commission investigation into complaint on the National Treasury
government transversal contract for mobile communication services
On 14 March 2016, National Treasury issued a tender for the supply and delivery of mobile communication services to national and
provincial government departments for the period 15 September 2016 to 31 August 2020. Vodacom was selected as the preferred
supplier on a non-exclusive basis after the other bidders were eliminated at different phases of the competitive bidding process.
The Competition Commission has initiated an investigation against Vodacom Group for alleged abuse of dominance in terms of
section 8 of the Competition Act. The tender process was initiated and controlled by National Treasury through strict governance
procedures, and we are confident that we followed due process in a fiercely contested and transparent bidding process.
Vodacom Group on track to transformational heights
Vodacom is committed to transformation through the implementation of Broad-Based
Black Economic Empowerment (BBBEE).
This commitment was recognised this year when Vodacom Group was awarded the Independent Top Empowered Companies Award for
the Most Empowered Black-Managed Company, as well as achieving a recognition award from the BBBEE Commission for being the first
company in South Africa to report fronting practices identified through its procurement processes.
Vodacom South Africa exceeded its target of Level 4 and attained a Level 3 BBBEE status, while its subsidiary Stortech retained its
Level 1 rating. This resulted in the Group having a significant improvement in its overall scorecard points, moving from 101.91 points
to 108.03 points.
BBBEE results for Vodacom Group
We achieved significant improvement this year in scores across the majority of the elements, resulting in an overall increase in score of
6.12 points.
Achieved Achieved
Target points points
Scoring element points 2018 2017 Variance
Ownership 25 16.20 16.17 0.03
Management control 23 15.72 14.79 0.93
Board representation 8 5.83 5.33 0.50
Top management representation 5 4.33 4.33 –
Employment equity 10 5.56 5.13 0.43
Skills development 20 19.55 17.27 2.28
Enterprise and supplier development 50 44.79 41.68 3.11
Procurement 25 20.55 18.00 2.55
Supplier development 10 7.54 8.68 (1.14)
Enterprise development 15 16.70 15.00 1.70
Socioeconomic development 12 11.77 12.00 (0.23)
Total 130 108.03 101.91 6.1203 Vodacom Group Limited Regulatory report for the year ended 31 March 2018
Regulatory report continued
Ownership Enterprise and supplier development
The Group has an effective black ownership of 17.56%, a This element has three sub-sets: procurement, supplier
nominal increase from the previous year of 17.19%, resulting in development (2% net profit after tax (NPAT) spend target),
a score increase of 0.03 points – 16.20 out of 25. and enterprise development (3% NPAT spend target). Under
procurement, Vodacom’s commitment is demonstrated in the
Management control shift of spend to BBBEE-status suppliers and black-owned
suppliers.
The Group exceeded the previous year’s score of 14.79, with a
score of 15.72 out of 23, as a result of transformational We spent R173 million on supplier development, up from
changes in its occupational levels under employment equity. R151 million in the prior year, targeted on developing SMMEs
within Vodacom’s supplier base; this included investing
Skills development R14 million towards the transformation of our retail franchisee
base, which resulted in 24 Vodacom shops changing ownership to
Our consolidated training spend increased from R175 million black individuals. Under enterprise development, more than
to R248 million, with more than R8.5 million invested in the R388 million was invested in developing black-owned ICT SMMEs
development of black youth living with disabilities, R5 million outside of Vodacom’s business. The collective score for this
more than the prior year. This resulted in an impressive total element was 44.79 out of 50 – three points higher than the
score of 19.55 out of 20 points. previous year.
Socioeconomic development
The Group fell slightly short of obtaining full points.
Procurement spend criteria (Rbn) 2018 2017 YoY increase
BBBEE spend – All empowering suppliers 30.8 22.6 8.2
BBBEE spend – Qualifying Small Enterprise (QSE) 2.8 1.7 1.1
BBBEE spend – Exempted Micro Enterprise (EME) 1.7 0.7 1.0
BBBEE spend – >51% Black-owned suppliers 9.8 6.2 3.6
BBBEE Spend – >30% Black women-owned suppliers 8.2 4.8 3.4
Bonus point: BBBEE procurement spend from designated group suppliers that are at
least 51% black-owned 1.6 0.6 1.004
International
Tanzania
Mandatory listing requirements Customer registration
Vodacom Tanzania’s Initial Public Offer (IPO) was completed In July 2017, the TCRA issued USD900k penalties against
in July 2017, following amendments of the Electronic Vodacom Tanzania for non-compliance offences found in
Postal and Communications Act 2010 (EPOCA) by the tests conducted in December 2016. Other operators in
Finance Act 2017, to allow participation by international Tanzania received similar fines. In September 2017, the
investors as well as Tanzanian investors. The IPO achieved TCRA held further tests on compliance with SIM registration
the 25% target set by the EPOCA amendment, broken down requirements and issued a non-compliance order against
as follows: 60% local Tanzanians, 16% Internationals and Vodacom Tanzania and other operators in December 2017.
24% underwritten by the Public Investment Corporation Vodacom Tanzania has submitted its defense, which showed
(PIC). Vodacom Tanzania was listed on the Dar es Salaam full compliance for September 2017 tests, and awaits the
Stock Exchange in August 2017. TCRA decision on the non-compliance order. Vodacom
Tanzania continues working with the TCRA Industry SIM
Tanzania 700 MHz auction Registration Committee to improve the process to ensure
On 8 June 2018, the Tanzania Communications Regulatory compliance. Initiatives include: moving to a new activation
Authority (TCRA) commenced an auction of 2x20 MHz in and registration after verification electronic process in
the 700 MHz band. The results are expected to be July 2017, the integration of the National ID system, and
published during June 2018. a pilot on biometrics in February and March 2018.
Quality of Service (QoS) regulations Mobile payment regulations and licences
The Ministry of Communications issued QoS regulations, In February 2018, the Central Bank approved Vodacom
which largely retained previous regulations. The TCRA Tanzania’s application for the Payment System Licence.
continues to assess QoS on a quarterly basis, and if Following this approval, and as required under the new Mobile
Vodacom Tanzania is found to be non-compliant there is a Money Payment Regulations, Vodacom Tanzania will apply for
risk of incurring penalties. Vodacom is currently compliant the Electronic Money Issuer Licence. The Central Bank has
with the majority of the obligations and have an action plan allowed Vodacom Tanzania to continue providing mobile
money services pending the processing of the application.
to continue to address areas where non-compliant.
Vodacom Tanzania is also working on forming a separate
M-Pesa corporate entity to comply with the new regulations.05 Vodacom Group Limited Regulatory report for the year ended 31 March 2018
Regulatory report continued
Mobile termination rate (MTR) Internet and social media bans
In June 2017, the TCRA commenced a cost study with Incyte, It has become increasingly common for the Government to
a UK based consultant. The study covered wholesale voice impose internet and social media bans for short periods, when
termination rates, mobile data cost and fixed wholesale costs. public demonstrations and protests take place. In February 2018,
In December 2017, the TCRA announced a five-year MTR a lawyer and NGOs lodged a complaint with the Public Prosecutor
regulation glide path: on 1 January 2018 the MTR decreased against mobile network operators for implementing these internet
from TZS26.96 to TZS15.60; on 1 January 2019 it will decrease bans. They also registered these complaints with the Governments
to TZS10.40; on 1 January 2020 it will decrease to TZS5.20; of South Africa and United Kingdom, and issued a press release.
on 1 January 2021 it will decrease to TZS2.60, and on Together with other operators, we continue to engage with the
1 January 2022 it will be decreased to TZS2.00. The TCRA did Government to seek that such bans are not necessary. Freedom
not issue any regulation on mobile data and fixed wholesale costs. of expression and the right to privacy should be respected, and
Following Board approval, Vodacom Tanzania has commenced these bans, if implemented, should be issued in writing from the
the process to appeal against the MTR decision at the Fair Regulator in accordance with the law, restricted to only a short
Competition Tribunal. time period and to the locations of concern.
Taxation Revenue Collections System (RCS) Communications Bill
On 1 May 2017, following direction of the President, the Tax A new Communications Bill was presented to Parliament in
Revenue Authority (TRA) commenced the process to implement April 2018, with a view of being promulgated this year. The Bill
the RCS, which is designed to automate the assessment and is expected to be presented to the Senate for final approval this
payment of VAT and excise duties across different sectors. month. Key areas of the Bill, which Vodacom DRC is working with
The TRA issued governing RCS regulations on 29 July 2017, industry association to address, include: ensuring licence regime
which required implementation of the RCS in September 2017. is consistent with international standard; retaining existing rights;
Vodacom Tanzania, along with other licensees complied with the the rights and obligation of a public fibre licensee; competition
regulations. Vodacom submitted proposed amendments to the law regulation; and sim registration requirements.
regulations and continues to engage with the TRA on: (i) concerns
with the taxation collection, reconciliation, and payment process, DRC Finance Act and taxation
which have largely been addressed in implementation since In December 2017, the Finance Act was passed and did not
September 2017, and (ii) controls to ensure that the customer contain material new or additional taxes for telecommunications
data is only used for tax purposes and to protect privacy of sector, and included some positive measures such as the
information in accordance with the applicable regulations. introduction of a 50% reduction on VAT tax on fuel used in base
stations and lower tax supplement fees on disputed tax claims.
Subsequently, there are government proposals to extend the
DRC excise duty to cover all telecoms services including “free” voice,
sms and data, which the industry association are engaging on.
Fibre Licence
In April 2017, the Communications Regulator communicated 4G Licence
to Vodacom DRC that it is not authorised to provide fixed/fibre On 11 May 2018, Vodacom DRC was granted a 4G licence, which
services to end users under its Mobile licences, and together includes right to refarm existing 1 800 MHz spectrum, and the
with the Tax Authority commenced an investigation. This brought assignment of 2x10 of 800 MHz by 9 May 2019. The 800 MHz
about the risk of potential non-compliance penalties being assignment will become usable following completion of the
imposed by the Regulator and the Tax Authority against digital migration. Vodacom DRC has since launched 4G under
Vodacom DRC for providing such services to enterprise customers this licence using refarmed 1 800 MHz spectrum.
without the required licence. As part of the mitigation plan,
Vodacom DRC submitted an application to the Regulator and Sub-contracting law
the Minister of Communications for fibre backhaul and last mile In March 2017, a new law was passed in the DRC requiring all
licences. In April 2018, the Government and Vodacom DRC agreed industries to sub-contract only with Congolese owned and
to a USD950k upfront fee for fibre backhaul and last mile licences registered companies by 15 March 2018. This implementation
and USD500k fine for operating without licence. Vodacom DRC date was postponed in March 2018 following the formation of a
is engaging with the Regulator to finalise licence terms. Government Committee to review the law and its implementation.
Vodacom DRC is participating in industry association engagement
with this committee and proposals specific to the ICT sector.06
Vodacash recapitalisation M-Pesa recapitalisation requirements
Due to concerns about profitability of the mobile financial services Following a request from the Central Bank, Vodacom Mozambique
sector, the Central Bank instructed Vodacash DRC and the industry submitted a recapitalisation plan to ensure compliance with
at large to recapitalise their business with a view to demonstrate regulations, and to address the negative solvency ratio concern.
profitability and sustainability. Vodacash DRC has submitted a In April 2018, the Central bank approved Vodacom Mozambique’s
recapitalisation plan for Central Bank’s approval. recapitalisation plan.
Environmental impact study
In February 2017, the Environment Agency (ECA) informed Lesotho
Vodacom DRC that they had not complied with their obligations
to conduct environmental impact assessments for base station Mobile financial services licence
sites, including power consumption and generation. Following Following the issue of new regulations in October 2017,
engagement with the ECA and the Ministry of Environment, Vodacom Lesotho submitted an application to the Central Bank
Vodacom DRC was able to secure a waiver of USD5 million fine for a new mobile financial services licence to replace the letter
for non-compliance. Vodacom DRC received an extension to of no objection as required under the new regulations. The
comply and paid validation fees of USD1 million to ECA. In Central Bank approved the application, and granted the licence
December 2017, Vodacom DRC completed environmental impact to Vodacom Lesotho on 31 January 2018 for a period of a year.
assessment for all base station sites and the ECA validated all the The licence is renewable annually on accordance with the
assessments following payment of USD1 million validation fees. new regulations.
VAT increase
Mozambique In February 2018, the Government announced general
VAT increases from 14% to 15%, and that telecoms sector VAT
Customer registration increases from 5% to 9%. Initially the Government proposed to
The Communications Regulator completed an audit in June 2017 increase telecoms sector VAT to the same levels as other sectors,
with no adverse findings made on Vodacom Mozambique. however Vodacom Lesotho secured a phased approach given
that the VAT increase would result in higher cost to communicate
Mobile termination rate review for consumers.
In November 2017, the Communications Regulator completed
the LRIC plus cost study on MTR and set a glide path regulation:
1 January 2018 from MT0.48 to MT0.43; 1 January 2019 MT0.39;
and 1 January 2020 MT0.36.
2G and 3G licence renewal and spectrum
Vodacom Mozambique’s 2G and 3G licences expire in August 2018
and November 2026 respectively. Vodacom Mozambique has
formally submitted an application to the Communications
Regulator for the renewal of the 2G licence, 3G licence and the
conversion to the unified licence under the new Communications
Act 2016.
In June 2017, the Communications Regulator provided an
opportunity to comment on draft auction rules for allocation of
800 MHz, 1800 MHz, and 2100 MHz. Vodacom Mozambique has
submitted comments. To date, the Regulator has not issued final
documentation.
Lawful interception
National Security Authority (NSA) is consulting on implementation
of lawful interception capability. Vodacom Mozambique is
participating in the NSA process to ensure the system is
implemented and regulated in accordance with the applicable law,
has sufficient controls and protections in place to ensure that the
system is only used for essential national security matters, and
privacy of customer information is protected.You can also read
